The attorneys general from California and Minnesota are contesting the Commodity Futures Trading Commission’s (CFTC) strategy on regulating prediction markets, asserting that the federal entity lacks the capacity to manage gambling-related issues such as addiction and social implications.
Attorney General Keith Ellison of Minnesota expressed to Bloomberg that state governments are better equipped to address the risks tied to gambling due to their pre-existing regulatory frameworks aimed at mitigating its wider societal effects.
“We possess a comprehensive regulatory system, which the CFTC lacks,” Ellison stated, pointing to Minnesota’s current gambling regulations.
These remarks arise amidst increasing legal and regulatory tensions surrounding prediction markets, which have seen substantial growth in the past 18 months and enable users to place bets on outcomes ranging from major sports tournaments like the World Cup to political events including the upcoming 2028 Democratic presidential nomination.
The CFTC claims it has “exclusive jurisdiction” over platforms involved in prediction markets, creating a jurisdictional dispute with states that contend gambling regulation should remain within their domain.
California Attorney General Rob Bonta characterized the issue as a quintessential states’ rights matter, criticizing the federal agency’s classification of sports-related prediction markets as derivatives. He remarked that the agency is attempting to “force this square peg into a round hole.”
Bonta also posited that the legal dispute could eventually escalate to the U.S. Supreme Court if federal appellate courts deliver conflicting judgments. “There may be a split among the circuits, which could lead to the Supreme Court’s involvement,” he noted.
The tensions have escalated following the CFTC’s lawsuit against Minnesota last month over the state’s enactment of a pioneering law that bans prediction markets like Kalshi and Polymarket.
The CFTC Chairman Michael Selig remarked that the law in Minnesota “criminalizes lawful operators and participants in prediction markets instantly.”
The agency is in the process of establishing new regulations that would permit most sports-related prediction markets, while imposing restrictions on wagers associated with war and terrorism, even as legal challenges persist.